RLI Corp.

Good day and welcome, ladies and gentlemen, to the RLI Corporation's first quarter earnings teleconference. As a reminder, we will open up the conference for questions and answers after the presentation. Before we get started, let me remind everyone that through the course of the teleconference, RLI management may make comments that reflect their intentions, beliefs, and expectations for the future. As always, these forward-looking statements are subject to certain factors and uncertainties which could cause actual results to differ materially. Please refer to the risk factors described in the company's various SEC filings, including the annual report on Form 10-K as supplemented in the Form 10-Q for quarterly period ending March 31st, 2021, which should be reflected carefully. The company has filed a Form 10-8 with the Securities and Exchange Commission that contains the press release announcing first quarter results. RLI management may make reference during the call to operating earnings and earnings per share from operations which are non-GAPP measured for financial results. RLI operations earnings and earnings per share from operations consist of net earnings after the elimination of after tax realized gains or losses. and after-tax unrealized gains or losses on equity securities. RLI management believes these measures are useful in gauging core operations performance across reporting periods and may not be comparable to other companies' definition of operating earnings. The Form 8 contains a reconciliation between operations earnings and net earnings. The Form 8 and press release are available at the company's website at www.rlicorp.com. I will now turn the conference over to RLI's Vice President, Chief Investment Officer and Treasurer, Mr. Ander Dieffenthaler. Please go ahead, sir.

Thanks, Casey. Good morning, and welcome to RLI's first quarter earnings call for 2021. Joining us today are John Michael, Chairman and CEO, Craig Cleathermus, President and Chief Operating Officer, and Todd Bryant, Chief Financial Officer. As usual, Todd will start off with financial details on the quarter. Craig will follow with some color on the product portfolio and market conditions. We can then open the call to questions, and John will close with some final thoughts. Todd?

Thanks, Aaron, and good morning, everyone. Yesterday, we reported first quarter operating earnings of 87 cents per share. The quarter's result reflects elevated winter storm losses which were more than offset by favorable benefits on prior year's loss reserves, as well as improved current year casualty results. We achieved 20% top line growth or 10% growth when adjusting the comparable quarter last year for premium return to transportation insurers. As a reminder, at the onset of the pandemic, we helped our public auto insurers by adjusting or returning premium which resulted in a $23 million decrease in our transportation business. We believe adding the premium back when comparing to last year provides a more accurate view on premium growth in the quarter. In total, we posted the 86.9 combined ratio. Investment income was down 7.6%, reflective of the decline in reinvestment rates during 2020. Unrealized gains on the equity portfolio were in stark contrast to unrealized losses experienced during the same period last year and served to bolster net earnings this quarter. Additionally, investee earnings advanced nicely to start the year, which accrued to net earnings. Craig will talk more about market conditions in a minute, but from a high level, all three segments experienced growth. Property led the way up 31% as rates and market disruption continued to support growth. Reported casualty growth was plus 19% compared to last year, But as previously mentioned, we want to call out the comparative benefit from the $23 million public auto premium adjustment in the first quarter of last year. Adjusting last year's result for this amount, casualty growth was fairly modest, as was sureties. From an underwriting perspective, this quarter's combined ratio of 86.9 compared to 92.0 a year ago. Our loss ratio declined 5.6 points to 45.9, despite a 7-point impact from winter storm URI, one of our largest winter or spring storm events experienced. Of the $16 million in net storm loss, $15 million was in the property segment and $1 million was in the casualty segment related to property exposure and certain package coverages. Favorable reserve development was up notably compared to last year and was widespread across most products. As a reminder, in the first quarter of last year, uncertainty around COVID influenced our approach to indications we were seeing in prior years reserves, as well as specific COVID reserves we established on the current accident year. In the first quarter of 2020, we recorded 5 million in COVID-specific reserves, 2 million in property, and 3 million in casualty. On an underlying basis, if you exclude prior year reserve benefits, catastrophes, and the aforementioned reserves established for COVID, our loss ratio is down in 2021. The casualty segment is influenced in this result, and its underlying loss ratio is down about three points from the same period last year. An improving mix in modest reductions in lost booking ratios, similar to what we discussed on our fourth quarter call, have driven the improvement. From an overall COVID perspective, total reserves are largely unchanged from year end. Moving to expenses. Our quarterly expense ratio increased half a point to 41. In addition, general corporate expense was up 1.6 million. These increases are driven by amounts accrued for performance-related incentive plans. The combination of significantly higher operating and net earnings, given the relative equity portfolio performance, plus an improved combined ratio drove these metrics higher. Excluding incentive amounts, other operating expenses were flat. Turning to investments, risk assets continue to lead with positive returns in the quarter from both public equities and high yield credit. Traditional investment grade bonds couldn't overcome higher yields and price declines offset the positive return from other assets. All in, our portfolio posted a 0.2% return for the first quarter and we are more than happy to trade a modest price decline in bonds for the opportunity to put operating cash flow to work at higher rates. Outside of the core portfolio, investee earnings were also a contributor in the quarter, with Maui Gym and Prime each adding $3.7 million to the quarter's results. Prime continues to benefit from profitable growth, and Maui Gym has rebounded nicely from a more difficult period in mid-2020. All in, a very good quarter and solid start to the year. And with that, I'll turn the call over to Craig.